Full text: Repair the roof when the sun is shining (171)

Europe's current economic situation J 11 
theless remains true that the consequences of Brexit are becoming apparent, 
and indicate the need for a downward revision of growth for 201 7 and 2018. In 
addition, there is still real uncertainty about the outcome of negotiations 
between the UK and the EU27. With inflation rising due to depreciation of the 
pound, the Bank of England felt obliged to raise rates in early November. 
Growth is being driven mainly by domestic demand, which has contributed 
1.7 points to the growth-including a one-point contribution by private 
consumption - out of the 2.3% year-on-year growth in the second quarter. 
Household consumption has been stable during the first two quarters of 201 7, 
up by 0.4% and 0.5% respectively, despite a slowdown in households' real 
disposable income. It has risen by more than 0.8% in Germany, Spain and the 
Netherlands. For the year 2016 as a whole, household purchasing power bene­
fited from both an increase in employee remuneration (up 2.9% in nominal 
terms versus 2.5% in 2015 and 2.1 % in 2014) and a fall in energy prices. This 
boost faded in the beginning of 201 7 as inflation rose, from 0% at the start of 
2016 to 1.5% in the second quarter of 201 7, reducing household purchasing 
power even while nominal earnings were still growing. A fall in the savings rate 
from 12.3% in second quarter 2016 to 12% in first quarter 2017 helped to 
maintain households' level of consumption. 
Despite a rebound in Germany in the first quarter of 201 7 and dynamic growth 
rates in France and Spain, investment declined (0.2%) in the first quarter in the 
euro area, due both to Italy but especially to the strong downturn in Ireland, a 
fall that was offset in the second quarter of 201 7, which also helped contribute 
to the rebound observed in the euro area as a whole., As for the components of 
all this, Spain and Germany stand out for their particularly high levels of house­
hold investment. This has been stimulated by favourable financial conditions 
and by a rebound benefiting both from these positive financial conditions as 
well as from the continuing upturn in the Spanish property market following 
the lengthy and steep contraction, which began in 2007 and was completed in 
late 201 3. During that period, investment in Spanish housing fell from 10.6% of 
GDP to 5%. Since then it has picked up to 5.6%. 
Over this same period, external trade continued to make a positive contribution 
to growth in the euro area (0.4 point), despite the recent strengthening of the 
1. Irish statistics on investment exhibits strong volatility and sharp increases or decreases are often
followed by reverse movements the quarter after. Despite the low weight of Ireland in the Euro
area GDP, such change in the investment growth has some impact on the aggregate

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